Dividend Analysis: The J.M. Smucker Company

Last week, we did an analysis of 3 dividend stocks from the oil sector. All 3 of those companies had made our select group of companies poised for big things in terms of dividend growth. We have reviewed a few in our free mailing list and today we are taking a deeper look at another one, The JM Smucker Company (NYSE:SJM). A company that I have to admit not knowing prior to this analysis so I was certainly surprised to see it come up with such great numbers. Could it turn out to be an even better pick than the oil stocks?

I did find a few good things about the company while researching it. Some of the company’s brands, such as Folger’s coffee, Robin Hood Flour or Crisco oil, are solid brands. I did not know that Smuckers was behind these products. Also, the fact that it has been doing business since 1897 is a great sign of stability, which is one of the things we’re looking for when looking for long term passive income. The stock has been paying dividends since 2002. This is certainly not as much as some other names that we have but good enough to be looked into. No surprises in the fact that we will judge it using the 20 things we look for in dividend stocks - (click charts to enlarge).

Dividend Metrics

Ticker

Name

Current Dividend Yield

5 year Dividend Growth

1 year Dividend Growth

SJM

JM Smucker Co/The

2.64

9.04

-6.67

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Even compared with the solid names we’ve been looking at, SJM’s dividend profile is very strong. Its dividend yield of 2.64% is very strong and both the 1 year and 5 year growth is very solid. It certainly looks like a very solid dividend play if the company can keep up the growth.

Company Metrics

Ticker

Name

Sales Growth (1 year)

Sales Growth (5 year)

Earnings growth

P/E ratio

Margins growth

Payout ratio

Return on Equity

Debt to Capital Ratio

SJM

JM Smucker Co/The

22.55

22.65

18.81

15.91

3.79

34.89

9.63

0.13

Click to enlarge

Wow, every single number in this table looks like a winner. The company has high sales growth, earnings growth, a very reasonable P/E ratio, improving margins, a low payout ratio and almost no debt.

Stock Metrics

Ticker

Name

Trend Analysis

Price

Trading Volume

SJM

JM Smucker Co/The

75.87

538425.125

Click to enlarge

Industry Metrics

Food sector companies usually make very good dividend plays. Why? No matter how the economy reacts, they are generally able to keep up stable growth, constant margins that bring the company earnings, cash flow and in the end that translates into good dividends. The competition is present but choosing strong brands usually gives me confidence that it can be kept up.

Overall Impressions

This is a clear cut decision. All signs point to the same direction; Smuckers is a great company and the perfect dividend play both for the short and long term. I would assume that the company will be able to increase its payout significantly over the next 5 to 10 years